Frequently Asked Questions

Why does the total depreciation not match the property purchase price?

Short Answer: Not every component of your property is depreciable.

While the building and its fixtures and fittings depreciate over time, the land itself does not. This means when you buy a property, a significant portion of its cost, attributed to the land value, is excluded from depreciation.

Furthermore, assets within your property depreciate at varying rates based on their projected useful life, as set by the Australian Taxation Office (ATO). Some items might lose value faster than others, leading to fluctuations in annual depreciation amounts. There’s also the consideration of residual value, which is an asset’s estimated worth at the end of its depreciation cycle. Depreciation captures the decline in an asset’s value from its initial cost down to this residual value, but not beyond it.

Additionally, specific costs related to your property might be immediately deductible in the year they occur rather than being spread out as depreciable amounts. As you continue to own the property, renovations and improvements can also influence its depreciable value, albeit separately from the original purchase price. Lastly, the method of depreciation calculation you choose, be it the Prime Cost or the Diminishing Value method, can result in different depreciation values over the asset’s life.

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